It's no secret that money is important today. The oil situation, relations with Ukraine and Europe, military operations with Syria - everything is reflected in the Russian economy and financial market. And it’s no secret that people don’t really trust the ruble, since its exchange rate has changed very much over the last year 2014-2015.

And due to the unstable behavior of our national currency, people feel more confident if they have a small reserve reserve currency, a kind of island of safety in the “turbulent sea” of our country.

Why do you need a currency reserve and what to do with it:

Large banks use currency as a tool for settlements between partner countries and to create a kind of foreign exchange reserve. This reserve is used in the same way as assets, instead of giving way to gold and oil. The latter have faded into the background, since there is no longer the same confidence in their increasing value.

History of the reserve currency:

Initially, only the British pound sterling played this role, but in 1944 it was decided to introduce a second currency - the US dollar. And within several years it took a dominant position as a currency of account.

In 1976, with the abolition of the gold standard and the introduction of free exchange rate fluctuations, two more potential currencies appeared - the German mark and the Japanese yen.

And in 1999, after the unification of the European Union, the world's second largest reserve currency, the euro, entered the market. Which firmly occupied the pedestal behind the dollar.

How much reserve currency is in Russia:

According to the idea, any currency can be a reserve, the main thing is that there is no crisis, war, revolution, etc. in the country. In general, everything would be calm. But this is not the main thing; it is necessary that countries begin to pay it off among themselves. Only in this case is the currency recognized as international.

As of 2015, the international reserve stock in Russia is about 370 billion US dollars. Then there are euros, pounds and yen. The latter have a small percentage of the total reserve, approximately 4%.

This is a national (someone's) universally recognized in the world, which is accumulated by other countries in . It performs a function, serves as a way to determine currency, and is used, if necessary, as a means of conducting foreign exchange interventions, as well as for conducting international payments.

Why accumulate foreign currency reserves:

An example of using a foreign currency reserve (reserve currency) to stabilize the exchange rate of the national currency:

World reserve currencies

The international world reserve currencies currently are: US Dollar (USD), Euro (EUR), Pound Sterling (GBP), Japanese Yen (JPY), Swiss Franc (CHF), Chinese Yuan (CNY) and IMF SDR (SDR). Percentage ratio between currencies in international accumulations of foreign exchange reserves:

US dollar USD as the main reserve currency

Pound Sterling GBP as a reserve currency

The pound sterling was the main reserve currency in most countries of the world in the 18th and 19th centuries. Heavy economic situation in Great Britain after the Second World War and the increasing dominance of the United States in the world economy led to the loss of the pound sterling status as the most significant currency. In mid-2006, it was the third most widely accepted reserve currency.

Japanese Yen JPY as a reserve currency

The Japanese Yen has been seen as the third most important reserve currency for several decades, but recently its use has declined while the role of the Pound Sterling has increased.

Swiss Franc CHF as a reserve currency

The Swiss Franc is used as a reserve currency due to its stability, although the share of all Swiss francs, as a rule, below 0.3%. January 15, 2015 National Bank Switzerland has lifted the cap on the exchange rate of the Swiss franc against the euro. This decision provoked a collapse in the rates of major world currencies against the franc.

Chinese Yuan CNY as a reserve currency

Since 2016, the IMF has included the Yuan in the “basket” (SDR or SDR), which made the Yuan one of the reserve currencies. At the same time, the yuan is only partially convertible.

Special Drawing Rights SDR (SDR) as a reserve currency

(SDR) is an artificial reserve and means of payment issued by the (IMF). The SDR has a limited scope and is circulated only within the IMF. Used to regulate balances of payments, replenishment and settlement of IMF loans.

It's no secret that money is important today. The oil situation, relations with Ukraine and Europe, military operations with Syria - everything is reflected in the Russian economy and financial market. And it’s no secret that people don’t really trust the ruble, since its exchange rate has changed very much over the last year 2014-2015.

And due to the unstable behavior of our national currency, people feel more confident if they have a small reserve reserve currency, a kind of island of safety in the “turbulent sea” of our country.

Why do you need a currency reserve and what to do with it:

Large banks use currency as a tool for settlements between partner countries and to create a kind of foreign exchange reserve.

World reserve currencies: what are they? Objectives and mechanism of use.

This reserve is used in the same way as assets, instead of giving way to gold and oil. The latter have faded into the background, since there is no longer the same confidence in their increasing value.

As a result, the world reserve currency is a “safety cushion” in situations where financial condition The country is very unstable. When advancing financial crisis, the reserve is used to maintain the stability of the national currency.

History of the reserve currency:

Initially, only the British pound sterling played this role, but in 1944 it was decided to introduce a second currency - the US dollar. And within several years it took a dominant position as a currency of account.

In 1976, with the abolition of the gold standard and the introduction of free exchange rate fluctuations, two more potential currencies appeared - the German mark and the Japanese yen.

And in 1999, after the unification of the European Union, the world’s second largest reserve currency, the euro, entered the market. Which firmly occupied the pedestal behind the dollar.

How much reserve currency is in Russia:

According to the idea, any currency can be a reserve, the main thing is that there is no crisis, war, revolution, etc. in the country. In general, everything would be calm. But this is not the main thing; it is necessary that countries begin to pay it off among themselves. Only in this case is the currency recognized as international.

As of 2015, the international reserve stock in Russia is about 370 billion US dollars. Then there are euros, pounds and yen. The latter have a small percentage of the total reserve, approximately 4%.

Major world currencies

The major world currencies include seven currencies of the world's leading powers; they are included in this group due to their liquidity and influence in the financial world.

It is in these currencies that most international contracts are concluded; they are also very popular when trading on the Forex currency exchange.

Their main features are high solvency, high liquidity (any of these currencies can be easily exchanged for another) and exchange rate stability.

World Currencies– US dollar, euro, pound sterling, Japanese yen, Swiss franc, Australian and Canadian dollar.

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RESERVE CURRENCY

U.S. dollar– USD, symbolized by the $ sign, is national currency The USA is also used as a means of payment in more than twenty countries around the world.

One dollar equals 100 cents.

For more than 50 years it has been the reserve currency of many national banks; immediately after the Second World War, it gradually replaced the English pound from circulation; this happened due to the fact that Great Britain at that moment was significantly weakened after the war, which could not but affect its economy.

Recently, it has begun to significantly lose its position as the main world currency due to the introduction of the euro and the unstable economic situation in the United States of America.

2. Euro– €, or EUR is the collective currency for a number of European countries, there are 17 of them in total – Estonia, Austria, France, Belgium, Finland, Germany, Slovenia, Greece, Slovakia, Ireland, Portugal, Spain, the Netherlands, Italy, Malta, Cyprus, Luxembourg.

One euro consists of 100 euro cents.

The introduction of the single European currency took place on January 1, 1999 for non-cash payments, and from January 1, 2002 as cash payment, the full transition to the euro occurred on June 1, 2002.

Now the euro rightfully competes with the American dollar in terms of turnover; a number of leading world powers have begun to use this currency when creating gold and foreign exchange reserves, as an alternative to the US dollar.

3. GBP— £, or GBP, the national currency of Great Britain, is currently recognized as one of the most stable world currencies. According to the latest data, the share of the pound in the gold and foreign exchange reserves of other countries is more than 5%.

One pound equals 10 pence.

The pound sterling has the highest value compared to other currencies in the world, based on Forex trading volumes, it is the fourth most popular currency, after the dollar, euro and yen.

4. Japanese yen— ¥ or JPY is the national currency of Japan, widely used as means of payment in Asian countries, and is the most popular currency in this region. Payments in the Yen are significantly inferior to the euro and dollar and are mainly used as a means of payment for Japanese goods.

The yen does not have a smaller denomination; on average, 100 yen is worth about 0.8 US dollars. Its exchange rate is quite unstable, so this currency is rarely used as a reserve currency.

The yen is the third most popular currency when trading on the forex market, the reason for this is the presence of the Asian trading session, during which most transactions are concluded in the yen.

5. Swiss frank- V currency quotes denoted as CHF, is the national currency and the main unit of payment in Switzerland. It gained its popularity due to the stability of the Swiss banking system and the high level of gold and foreign exchange reserves.

One Swiss franc is equal to 100 centimes.

For many years, this currency has been considered a standard of stability, this happens for two reasons - a high credit rating and the backing of paper banknotes with gold and foreign exchange reserves in the amount of at least 40% of their value.

6. Australian dollar— appears in quotes as AUD, the national currency of Australia. Although it is inferior in popularity to the above-mentioned currencies, it is still one of the seven major world currencies. Its popularity is facilitated by trading on the Sydney Currency Exchange, where this currency is very popular.

One Australian dollar is equal to 100 cents.

7. Canadian dollar– the abbreviation CAD, the national currency of Canada, is especially popular in settlements on commodity exchanges where timber, metals or energy are traded. The seventh currency in terms of trading volume, its purchase is actively carried out by importers of raw materials for subsequent settlements with suppliers.

One Canadian dollar is equal to 100 cents.

The main world currencies (world currencies) are widely used in the creation of gold and foreign exchange reserves; the dynamics of their exchange rates are closely interrelated. A fall in the value of one currency increases the price and popularity of another currency.

Speed, correctness and security of international payments are a basic factor in the country’s successful foreign economic activity, especially in the case of incomplete convertibility of the national currency. The use of major reserve currencies is a necessity for the global financial system.

A reserve currency is a currency that is included in the country's gold and foreign exchange reserves and thereby provides support for the national monetary unit. In the domestic economy of the country, reserve currencies are used:

• as an investment asset;
• for interventions to regulate the exchange rate of the national currency;
• for carrying out government payments for export transactions of international trade.

World reserve currencies- monetary units used to store the Central Banks’ own assets, support currency parity and international settlements.

Initially, the International Monetary Fund (IMF) used the term “reserve” only for currencies that had a significant weight in the fund’s settlement basket, since loans are provided only at the expense of member countries. If a currency is in sufficient demand, its position is strengthened and the issuing country receives additional income and privileges. Currently, the interpretation of the term has been expanded and includes monetary units that are widely used as a means of investment and payment with the following mandatory features:

• Stable means of payment. This implies full convertibility and minimal risk of loss due to exchange rate fluctuations. This increases the confidence of counterparties during mutual settlements.
• Large volumeGDPand a significant share of world trade. It was the large international trade turnover that was the key factor in the recognition of the Dutch guilder as a universal means of payment in the 17th century, the British pound sterling in the 19th century, and the US dollar in the 20th centuries.
• Developed domestic financial market. If banking system and other financial institutions of the country have the opportunity to attract large volumes of domestic and foreign investment at low costs and in a short time, this strengthens the position of the national currency;
• External network effect (networkexternalities) - additional value that consumers receive if their number increases. For example, settlements in US dollars have greater value than in less common currencies, since they allow more transactions to be carried out without additional conversion.
• Historical factor. Business practice has inertia, that is, the longer a currency is widely used in mutual settlements, the higher the likelihood of use in the future, like other world reserve currencies. What this is is clearly shown by the British pound sterling, which was the main means of payment in the 19th century and continues to be widely used, mainly due to its historical recognition.

The country issuing the world reserve currency receives certain financial advantages: the ability to cover external debt only with its national currency (this is now happening with the US trade balance) helps strengthen the position of its corporations in the world market. At the same time, supporting the national currency as a reserve currency requires fulfilling the requirements for maintaining currency stability, removing foreign exchange and trade restrictions, and timely taking measures to eliminate the balance of payments deficit.

Let us note once again that even if all the listed characteristics are present, a monetary unit receives reserve status only after Central banks begin storing assets in it.

Functions

A global reserve currency must perform three main functions:

Calculation tool

The usual practice in international trade is to determine the contract price in the exporter's currency, but there may be other options:

• if the importer consumes a significant volume of products, then, most often, it is he who chooses the most convenient means of payment for him;
• the total share of a particular exporter in world trade: export contracts in world reserve currencies are used not only in emerging markets, but also by countries such as the Russian Federation, for example, when selling energy resources;
• special types of settlements for certain sectors of international trade.

From point of view monetary policy, on domestic market The Central Bank can only influence purchasing power national currency - through the inflation rate. At the same time, it is necessary to constantly maintain parity with other countries, and for this purpose, 2-3 world reserve currencies can be selected for settlements.

Instrument of payment

If it is impossible or long term Direct conversion as an intermediate option (vehicle currency) uses a set of several reserve currencies, which significantly speeds up the process of coordinating purchase and sale requests.

Central banks can use intermediate conversion as a tool for intervention, especially if the national currency is not included in the reserve list or has limited convertibility.

Storage medium

The use of reserve currencies as denominations of debt obligations and valuable papers allows you to reduce risks from exchange rate fluctuations, as well as generally increase efficiency and speed of turnover international market capital. For example, shares of US companies denominated in dollars are freely quoted on all major world markets. stock markets without additional bureaucratic procedures.

Also, the world reserve currency can be used directly to store the assets of Central banks and private investors. An example is the Swiss franc, which has been a reliable safe-haven currency for over 100 years.

List according to the IMF

Major reserve currencies as of 2016:

• US dollar − USD;
• euro - EUR;
• pound sterling - GBP (positions have weakened significantly due to the start of Britain's exit from the EU, but, most likely, the pound will remain on the list of reserve currencies);
• Japanese yen - JPY;
• Swiss franc - CHF;
• Chinese Yuan - CNY (added only to the Special Drawing Rights basket and cannot be considered a full reserve on a global scale due to incomplete convertibility).

Special Drawing Rights

This term is applied to an artificial payment (and reserve) currency created by the IMF in 1969 for settlements between participants and third-party holders. It is used to regulate balances and cover deficits in the balance of payments, pay off loans and replenish fund assets.

Unit code - XDR (according to ISO4217 standard). It exists only in a non-cash form and is not convertible or promissory note. The main purpose of creation: eliminating the contradiction between the national and international nature of reserve currencies (Triffin's paradox).

The XDR rate is calculated daily and represents the dollar value of a basket of five currencies: US dollar, euro, pound sterling, yen and Chinese yuan. The interest rate for XDR is published weekly, the weight of the currencies included in the basket is adjusted every five years:

After the 2008 crisis, China proposed using XDR also for cash payments - in the form of coins and banknotes, but this idea did not receive support, primarily from the United States.

Payment system CLS

International payment system to carry out conversion interstate and interbank operations, it was created in 1997 and to date, the shareholders of CLS Bank are all Central Banks and large financial institutions from 17 countries.

The system works according to the “payment-versus-payment” system, which makes it possible to guarantee exchange in the required volume and at a pre-fixed rate. Share of CLS currencies in daily conversion operations accounts for more than 55% of the total global volume, and includes, in addition to reserves, such exotic options as the Hungarian forint and the South Korean won.

The ruble as a world reserve currency

The inclusion of the ruble in the IMF basket will be beneficial for the Russian Federation, both from an economic and political point of view.

World reserve currencies: concept and main functions

The first actions of the government and the Bank of Russia in this direction date back to 2011, when the start of the integration process with the CLS system was announced.

At the second stage, it is planned to create a specialized exchange for the sale of energy resources for rubles, which should cause a sharp increase in the need for ruble assets on the part of foreign partners. But the experience of using the euro shows that the process of transforming the national currency into a fully global reserve currency is happening quite slowly. Currently, connection to the CLS system is suspended primarily due to the sanctions imposed against Russia in 2014.

Questions and answers on the topic

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STRUCTURE AND TURNOVER OF THE FOREIGN EXCHANGE MARKET

The broad and ever-growing needs for international settlement transactions through trade and capital movements serve economic basis rapid growth in the volume of the world foreign exchange market and the spread of new types of instruments and methods of conducting transactions with them.

Traditionally, the foreign exchange market is divided into spot transactions, direct forwards, and derivatives financial instruments with currency (currency derivatives) - swaps, futures and options.

1. Spot transactions– exchange of two currencies on the basis of simple standardized terms with settlements on the second business day after the date of the transaction. This type of transaction is also called immediate delivery.

Despite the development of new forms of currency trading, the spot market continues to play a very significant role in the global foreign exchange market. The market is characterized by the participation of almost all countries and almost all currencies, highly standardized and automated transactions, usually large volumes of each of them.

2. Straight forwards– structurally close to spot transactions, transactions for the exchange of two currencies, but providing for settlements not on the terms of immediate delivery, but after more than two business days.

The only difference between currency forwards and spot transactions is that in a forward transaction, the parties agree on the rate at which they will exchange currency at a certain point in the future. The terms of forward transactions are usually a week, a month, three months, six months and a year. Currently, most forwards are concluded for a short period; forwards for a year are very rare. The forward rate can be equal to, above or below the spot rate. If the forward rate is lower than the spot rate, then foreign currency is sold with a forward discount; if the forward rate is higher than the spot rate, then the foreign currency is sold with a forward premium. Forward discounts or premiums are usually expressed as the difference in points between the spot and forward rates or as a percentage per year relative to the spot rate using the formula:

Where E – exchange rate, respectively forward and spot rates.

Coefficient P shows the number of periods until payment is due and thereby converts the interest to an annualized rate. With a forward contract duration of one month, to annualize interest, the result is multiplied by 12, with a contract duration of three months - by 4, a week - by 52.

3. Currency swaps– transactions involving the purchase and sale of a certain amount of two currencies on spot terms and a reverse transaction with the same number of currencies at an agreed date in the future, that is, on forward terms.

In forward transactions, approximately 85% is currency swaps, which are used primarily for the purpose of hedging currency risks. The mechanism of hedging is that a certain amount of the base currency (usually US dollars) is sold at the spot market rate for a counter currency and at the same time the parties agree to repurchase the same amount of dollars at a certain date in the future. Thus, a swap transaction is a combination of a spot transaction and a forward transaction. If Russian bank receives $1 million today, but he will need it only in three months; for now, he can invest these funds on the domestic market in ruble instruments. Instead of selling dollars for rubles on the spot market today and simultaneously buying dollars again on a futures basis for delivery in three months and thereby paying commissions on two different transactions, a bank can, in one swap transaction, first exchange dollars for rubles and then make a reverse exchange in three months, when he needs dollars.

As a result currency risk changes to credit, which fundamentally distinguishes the swap market from the spot market. More than 70% of swaps are concluded for a period of up to one week. Most swap transactions are carried out in a small number of highly liquid markets, since the key element for the parties is usually the market's ability to absorb large volumes of transactions without a significant change in prices. Historically, since the early 1960s.

Reserve currencies of the world: their role and main characteristics

swap transactions were used by the Central Bank to regulate liquidity. Central banks exchanged agreed quantities of national currencies to replenish liquidity in case the government needed additional reserve resources.

4. Futures– standardized forward currency contracts traded on exchanges.

Futures, which are the same forwards, but traded in the form of standardized contracts for certain amounts of currency on organized exchanges, appeared in 1972. The range of currencies traded in futures is very limited - usually the US dollar, yen, EURO, Canadian dollar , pound and Swiss franc. The size of the contract is limited by the rules of a specific exchange, trading occurs with delivery on strictly defined days of the year, the exchange imposes restrictions on the scale of changes in the exchange rate. The currency futures market is developing only in a few cities such as Chicago, New York, London and Singapore. Size futures contract usually less than the forward price and the commissions are higher.

5. Options- a contract that gives the buyer, for a certain fee, the right, which is not his obligation, to buy or sell, on the basis of a standard contract, a currency on a certain day at a fixed price.

Options are standard contracts, half the size of standard futures contracts, that give the buyer the right to buy (call option) or sell (put option) a specified amount of currency on a specified date (European option) or at any time before a specified date (American option). at a fixed price (strike price). Thus, the buyer of the option has a choice: either buy it or not buy it, while the seller is obliged to sell the option upon the first request of the buyer. For this, the buyer pays the seller a premium of 1–5% of the contract value. Options are used in the case, for example, of a company participating in a tender for the purchase of land abroad, when the company has offered to pay a certain amount, but is not sure that it will be chosen based on the results of the tender. Then a company that does not know whether it will need foreign currency or not can purchase an option to buy the currency, which it will actually exercise only if it wins the auction. Options are also used for the purposes of currency speculation: if the buyer purchases a currency at a price that is much lower than the prevailing market price, he, even minus the option price, ends up winning in relation to the seller.

The size of the currency trading market is incomparable and exceeds by an order of magnitude all other forms of international economic relations, such as trade in goods, trade in services, international movement capital, labor or technology. The international currency market turnover is in the trillions. dollars per day and increases by about 10% per year. Approximately 41% of all currency transactions are spot transactions, 53 are direct forwards and swaps and about 6% are futures and options, with the share of spot transactions remaining at a relatively stable level of 45%, direct forwards and swaps increasing, and futures and options continue to remain a relatively small market segment.

Control questions:

1. Explain the role of money in the economy.

2. Name the stages of the evolution of money.

3. What is financial money?

4. What is credit money?

5. What is the state’s monetary policy?

6. Name the tasks and functions of the central bank.

7. What are the areas of banking regulation?

8. Name the elements of the structure of the foreign exchange market.

ODiplom // Economics // 01/19/2018

Bibliographic description:

Nesterov A.K. World currencies // Educational encyclopedia ODiplom.ru

At the international level, world currencies are the basis of the world monetary system. Any currency is a monetary unit that is directly used to measure the value of goods and services. However, not every currency belongs to the category of world currencies, given their characteristics and features.

Concept and major world currencies

From the point of view of currency circulation from the perspective of the world monetary system and in the context of economic transactions on the world market, currencies are defined as world currencies based on the economic approach. In accordance with it, a world currency is considered a monetary unit that can circulate both in the domestic market of the state in which it is issued and beyond its national borders.

Hence:

The currency of any state can be classified as a world currency if international transactions for the purchase and sale of goods and services are carried out in this currency.

The economic approach is focused exclusively on the circulation of currency during transactions.

What is the world monetary system

At the same time, the investment approach to the interpretation of world currency is also widespread. According to this approach:

World currencies include reserve currencies that are accumulated by the central banks of other countries in foreign exchange reserves.

It is obvious that, according to the investment approach, the concepts of “world currency” and “reserve currency” are synonymous, and the only sign of a world currency is the fact of its accumulation in the foreign exchange reserves of other countries. This approach is based on maintaining currency parity and using reserve currencies as a means of conducting foreign exchange interventions.

Let's synthesize the above definitions:

World currency is a reserve currency that is used as an accepted means of settlement in the world commodity markets, for example, gold, oil, etc.

Accordingly, states can accumulate reserve currencies for settlements on world commodity markets.

Thus, we can distinguish major world currencies by their share in foreign exchange reserves.

The Chinese yuan became a global currency in 2016 when the IMF included it in the basket of reserve currencies for calculating Special Drawing Rights (SDRs). SDR structure in 2016-2020: USD 41.73%, EUR 30.93%, CNY 10.92%, JPY 8.33%, GBP 8.09%.

The Australian dollar is used to conclude international contracts on the Sydney Currency Exchange, the Canadian dollar is used in settlements on commodity exchanges when concluding contracts for timber, metals and energy.

At the same time, the considered interpretations are outdated and do not correspond to modern realities.

Moreover, such operations are understood as both trade and settlement operations and the accumulation of foreign exchange reserves. In general, the development of this approach in theoretical and applied meaning was largely due to the desire of a number of countries and regional economic blocs to promote their own currencies for their subsequent use as world currencies.

The main directions in this regard are the prospects for the currencies of a number of countries and integration unions.

		Prospects
	Russian ruble	Promotion Russian ruble in the world monetary system as a world currency was first declared in 2006-2007. At that time, such a decision was based on the fact that the sale of oil and gas for the Russian ruble could become a systemically significant factor for the ruble to become a reserve currency. However, with such a level of sales, the ruble would become only a means of international payments, since rubles would be purchased only in the volumes necessary for the purchase of oil and gas. In this regard, it should be noted that such an approach would not justify the costs required at that time for organizing the appropriate financial infrastructure. Currently, the promotion of the Russian ruble in the world monetary system is carried out both in terms of use in international payments, and in terms of expanding its use in foreign trade turnover and financial settlements.
	CNY	The rise of the yuan was largely natural as its role in international transactions grew. China has been using the yuan for a long time in settlements with Russia, North Korea, South Korea and a number of other countries in the Asian region, as well as with a number of countries in Africa and South America. investment projects, denominated in yuan. According to the SWIFT system, in 2013 the yuan accounted for 2.2% of all foreign exchange transactions, in 2015 – already 3%, in 2016 – 4%. Several countries have begun to use the yuan as a reserve currency when accumulating foreign exchange reserves. What are world reserve currencies, what are they and what are they used for? In 2017, the share of the yuan in foreign exchange reserves was 1.12%. In 2016, the yuan was included in the SDR with the third largest share, becoming the official reserve currency.
Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman	Khaliji or Gulf Dinar	These countries are members of the Gulf Cooperation Council, which has been planning for a long time to create a single currency, the Khaliji or Gulf dinar. The Gulf dinar was originally planned to be introduced in 2010, but Oman abandoned monetary union in 2006 and the UAE did so in 2009. As a result, the introduction of the Gulf dinar was postponed until 2015, then postponed again. Due to the insufficient degree of unification of national financial systems remaining participating countries, the introduction of the Gulf dinar may be delayed again.
Eurasian Economic Union (EAEU)	Altyn or Evraz	Active discussions on the introduction of such a currency by Belarus, Kazakhstan and Russia were held in 2014, and in 2015 Armenia and Kyrgyzstan joined them. Initially, the approximate time frame for the introduction of such a currency was determined until 2025. However, on this moment specific prospects are unclear and the possibilities have not been worked out, but are at the stage of determining the feasibility of creating a currency union of the EAEU.
	Not determined	The prospects for issuing a single currency are associated with the creation of the Development Bank, which creates objective preconditions for the creation new currency in future. Initially, such a currency will most likely be intended for non-cash transactions between the BRICS countries, and will be denominated in relation to the real, ruble, rupee, yuan and rand. The next stage will be the issue of paper money, backed by the economies of the participating countries, which may be joined by other countries in the future.

Characteristics of world currencies

Let us define a set of characteristics of the world currency.

From the point of view of its functions, a world currency must have three characteristics:

1. High solvency – reflects the degree of immediate confidence in a given currency as a means of payment in international transactions and contracts;
2. High liquidity – a currency can be easily exchanged for any other and reflects the transparency of settlement transactions of purchase and sale carried out using this currency as a means of payment;
3. Stability and stability of the exchange rate - the currency can be easily exchanged for the currency of another country, while losing on the exchange rate difference during the exchange Money for world currency or vice versa will be minimal.

It should be noted that, depending on the degree of convertibility, which depends on the liquidity characteristics, currencies can be freely convertible, limited or partially convertible, or non-convertible. At the same time, world currencies are a priori freely convertible.

Depending on the correlation between the location of the subjects of the transaction and the location of the transaction, currency convertibility can be internal or external. A world currency must have both internal and external convertibility.

In functional terms, the world currency also determines exchange rates, i.e. prices of monetary units of other countries, expressed in denominations of world currencies. Based on the dynamics of exchange rates in relation to world currencies, one can indirectly assess the trends in domestic economic development and foreign economic activities of different countries and compare them with each other.

From the point of view of the financial and economic approach, the world currency has three characteristics:

1. Issue affiliation - a world currency can be the national currency of a specific country or group of countries united in a monetary union with a single central bank, whose tasks include issuing a single currency of these countries;
2. Multifunctionality - the world currency must have several functional forms, which include banknotes and metal money, account records and electronic currency equivalents;
3. Materialization - international currency must be materialized in the form of traditional banknotes and coins, entries in bank accounts.

The status characteristics of the world currency are presented in the figure.

Status characteristics of the world currency

The functions of world currencies are presented in the table.

Performing the functions of a medium of exchange, a means of saving and a measure of value, world currency allows the private sector to conduct foreign economic activity, accumulate assets for use in current foreign activities, directly make payments, and the public sector to intervene in the foreign exchange market, accumulate foreign exchange reserves and use it as one of the guidelines for monetary policy. At the same time, the world currency is widely used to make payments for international transactions and is the subject of active trading on the main foreign exchange markets.

We call the dollar a “reserve currency” when we talk about its use by other countries in international trade transactions. For example, if Canada buys goods from China, China may prefer to pay in US dollars rather than in Canadian dollars. The US dollar is a more “liquid” money internationally, meaning most countries will accept it as payment, so China can use its dollars to buy goods from other countries, not just the US. This might not work with the Canadian dollar, and China would have to hold onto its Canadian dollars until it could find something to buy from Canada. Apply this scenario to all the countries in the world that print their own money, and you can see that without a currency accepted around the world, international trade would slow down and become more expensive. In some ways, this would be similar to erecting trade barriers such as the infamous Smoot-Hawley Tariff of 1930, which contributed to the Great Depression.

Many see a connection between the collapse of international trade and the war. Great French economist Frédéric Bastiat said that "when goods don't cross borders, soldiers will." No country can achieve a decent standard of living in conditions of complete autarky, that is, it cannot be completely self-sufficient in everything. If it cannot exchange necessary goods, it will feel the need to invade neighboring countries to steal them. Thus, a currency that is almost universally acceptable can be vital to both world peace and shared prosperity.

What does the expression "Reserve Currency" really mean?

However, the basis from which the term “reserve currency” originates no longer exists. Originally, the term "reserve" referred to the promise that a currency was backed and could be exchanged for a commodity, usually gold, at a specified rate. The first truly global reserve currency was the British pound sterling. Since the pound was equated with gold, many countries found it more convenient to hold pounds rather than the metal itself during the era of the gold standard. The great trading nations of the world settled in gold, but they could accept pounds more readily than gold, confident that the Bank of England would give them gold at a fixed rate of exchange at sight.

Reserve currency. How many reserve currencies are there in the world?

By the end of World War II, the American dollar received this status after the signing of the Bretton Woods Agreement. The US accumulated the lion's share of the world's gold as an "arsenal of democracy" for its allies even before entering the war. (The US still has more gold than any other country, and by a wide margin: 8133.5 tons compared to 3384.2 tons for Germany in second place).

The International Monetary Fund (IMF) was founded with the express purpose of monitoring the Federal Reserve's compliance with the Bretton Woods agreements, ensuring that the Fed would not inflate the dollar and would be willing to exchange dollars for gold at a rate of $35 an ounce. Thus, countries were confident that their dollars for trading purposes were “equivalent to gold,” as the British pound once was.

Introduction of a gold-backed reserve currency

However, the Fed did not honor its Bretton Woods obligations, and the IMF did not try to force it to hold enough gold to back all the currency in circulation at $35 an ounce. In the 1960s, the US financed the Vietnam War and the War on Poverty Lyndon Johnson through printed currency. The volume of dollars issued in circulation exceeded America's gold reserves at an exchange rate of $35 per ounce. The Fed was called to account in the 1960s, the Bank of France was the first, followed by others.

Central banks around the world, which had agreed to hold dollars instead of gold, became concerned that the United States did not have sufficient gold reserves to fulfill its promise. In the 1960s, the French-led run on the Fed caused a significant decline in US gold reserves from over 20,000 tons in 1958 to just over 8,000 tons in 1970. Refunds occurred at such a rate that the United States was left with no choice but to revalue the dollar at some higher rate or completely abandon its obligations to exchange dollars for gold. To its lasting shame, the United States chose the latter and “left the gold standard” in September 1971. (I calculated that in 1971 the United States would have to devalue the dollar from $35 to $400 an ounce in order to have enough gold reserves to convert all its currency into gold.) However, the great trading powers still held the dollar because it still served a useful function in settling international trade transactions. There was no other currency that could compete with the dollar, despite the fact that it was “untied” from gold.

Why did the dollar remain a reserve currency?

There are two characteristics of a currency that make it suitable for international trade: first, it is issued by a major trading power, and second, it retains its value over time. These two factors create a demand for holding this currency in reserve. Although the Fed actively devalued the dollar, and it lost value relative to other goods, it had no real competitors. The Deutsche Mark retained its value better, but the German economy and trade were part of the American one, meaning that stamp holders would find fewer goods to buy in Germany than dollar holders would find in the United States. Of course, psychological factors also contributed to the demand for dollars, since the US was the military protector of all Western countries from the communist threat.

Today we are seeing the beginning of change. The Fed is carrying out massive dollar inflation, reducing its purchasing power and opening the door for the world's major trading powers to use other, better money. This is important because losing the need to have US dollars as a reserve currency would mean that trillions of dollars in foreign hands would flow back into the US, causing either inflation, a recession, or both. For example, the US dollar's share of global foreign exchange reserves currently stands at 62%, mostly in the form of US Treasury debt. (Central banks are more likely to hold interest-bearing Treasuries rather than dollars themselves.) Currently, foreign-owned American debt stands at $6.154 trillion. Compare this to the US monetary base, which is $3.839 trillion.

If foreign demand for dollar assets falls, the Ministry of Finance will be able to finance the repayment of its debt in only three ways. First: States could raise taxes to pay off their foreign debt obligations. Second, they could raise interest rates to refinance their debt to foreign liability holders. Or three: they could just print money. Of course, they could use all three to varying degrees. If the United States refuses to raise taxes or increase interest rates and relies on the printing press (the most likely scenario, other than completely abandoning Keynesianism and adopting the tenets of the Austrian school of economics), the monetary base will increase by the amount of debt payments. For example, if the demand for holding dollar assets falls by 50% ($3.077 trillion), then the US monetary base will increase by 75%, which will undoubtedly lead to very high price inflation and a significant impact on the country's population. What is at stake here is the American standard of living.

So, as we see, many are interested in maintaining high demand for dollars as a unit of trade around the world. This is necessary to prevent price inflation, as well as not to burden American businesses with the increased costs that would arise for conducting foreign trade payments in a currency other than the US dollar.

Threats to the dollar as a reserve currency

The reasons for this threat to the dollar as a reserve currency lie in the Fed's policies themselves. In my opinion, other countries did not conspire to “attack” the dollar. However, the rest of the world is increasingly aware that the US is weakening the dollar through ZIRP (zero interest rate) and QE (quantitative easing). Accordingly, other countries are realizing that they may have to seek the best remedy conducting trade settlements rather than the US dollar. One factor that has helped the dollar remain in demand as a reserve currency in the short term, despite the Fed's inflationary policies, is that other currencies are also subject to inflation.

For example, Japan inflated the yen by even to a greater extent than the dollar, in a reckless attempt to revive its stagnant economy by making the currency cheaper. Now even European central bank will begin to implement some form of CC, apparently despite German objections. All the world's central banks seem to be of the mistaken belief that expanding the money supply will bring prosperity without the threat of inflation. This is obvious ignorance economic laws and realities. They cannot print economic recovery or prosperity. An increase in the money supply does not and cannot create any prosperity at all. Moreover, this misconception gives rise to a second mistake, namely, that it is not savings that are the foundation of wealth, but consumption. This fallacy mistakes cause for effect.

The third mistake is the idea that forcibly depreciating the exchange rate of one's currencies relative to other currencies will lead to an export-led recovery, or that some mystically conjured shot in the arm will cause a sustained recovery. This is wrong. Without going into details of the Austrian economic theory and capital theory, just let me point out that printing money destroys the structure of production due to a fraudulent change in the "price discovery process" in capitalism. When this happens, capital flows into projects that will never be completed profitably. Bubbles are created and burst, and companies suffer massive losses, thus destroying scarce capital.

Possible scenarios

Because of its money-printing philosophy, the dollar is highly prone to losing its vaunted reserve currency position to the first major trading country to stop inflating its currency. There is evidence that China understands what is at stake; he has increased his gold reserves and controls the export of gold from the country. If the second largest world economy and one of the major trading powers pegs its currency to gold, the demand for the yuan will increase and the demand for the dollar will fall overnight.

Or the long-standing European crisis in Europe will force Germany to leave the Eurozone and restore the German mark. I have long advocated for Germany to do just this because it would inevitably expose the rot of the euro, a widely used currency that has been plundered by half the countries on the continent to finance their bankrupt social systems. The European continent, excluding Britain, could become largely a Deutsche Mark zone, and the Mark could eventually replace the dollar as the world's primary reserve currency.

However, the main problem lies in the ability of all central banks to print fiat money, that is, money that is not backed by anything other than the power of the state, expressed through the laws of the means of payment. Central banks are really nothing more than legal counterfeiters. The establishment, hungry for war and the continuation of the welfare state, is forcing money to be printed. Both of these areas only consume capital and do not increase it.

In a metal money environment, where the money supply cannot be inflated, the true nature of military and social spending emerges, limiting the amount of money that society is willing to allocate to one or the other. But in a fiat money environment, military and social spending can rise unchecked and sharply because its adverse effects are felt later and the connection between consumer spending and its harm to the economy is poorly understood. Thus, both of these areas can grow beyond the regenerative and inexhaustible resources of the economy.

The best antidote is to eliminate central banks completely and allow private entities to participate in the issuance of money only subject to normal commercial laws. Healthy money would be 100% backed by goods that have actual value - gold, silver, etc. Any money creator issuing money certificates or uncertificated accounts (checking accounts) in excess of the promised rate of exchange for the underlying commodity would be guilty of fraud and would be punished under commercial and criminal laws, just as we currently punish counterfeiters. Tender laws prohibiting the use (in many cases) of any currency other than that imposed by the government would be abolished, and competing currencies would be welcomed. The market would recognize the best money and drive out the less popular ones; that is, better money would suppress bad or less good currencies.

We need to look at the concept of a reserve currency differently because it is important. We need to see it as a privilege and responsibility, not as a weapon that we can use against the rest of the world. If we abolish or at least relax legal tender laws and allow the process of price discovery to reveal the best sound money, if we allow the US dollar to become the best of currencies - the true sound money - then the chances of our individual and collective prosperity will increase greatly.

It's no secret that in the modern world money matters a lot. What is happening to the Russian economy today is directly related not only to the cost of oil, the situation in Ukraine, but also to the financial market. World reserve currencies are, first of all, a kind of island of security on which Russian citizens feel somewhat more reliable. The ruble has always been considered not very stable, but at the same time it occupied a well-deserved place in the financial market. Unfortunately, due to the fact that the national ruble has recently behaved extremely uncertainly, many have chosen world reserve currencies to save their savings. What kind of money can rightfully be considered such? After all, there are quite a lot of different monetary units on the financial market that can be considered quite reliable. How many reserve currencies are there in the world? Why were they chosen as a kind of “safe haven”?

What is a reserve currency?

Modern business society understands the concept of world reserve currency as the monetary unit that is required by banks of other countries to create a certain foreign exchange reserve. First of all, it is used as a tool for trading between different countries. It is also used as an international asset, establishing a strong relationship between the two leading currencies. This term is often used to refer to monetary units in bank settlements with certain organizations. Previously, such currencies were used to settle the gold and oil markets, thereby determining the cost of these resources. Today, they are used mainly for accumulation and also strengthen the ability to compete with exports by weakening their own currency.

World reserve currencies are a kind of “safety cushion” in case of financial instability. But initially it is worth noting that such cash reserves serve as a safety net in case of a financial crisis. It is no secret that it is the world reserve currencies that contribute to the weakening of the national currency. Which ones exactly - we will consider further.

How many reserve currencies are there in the world?

It has long been known that absolutely any monetary unit can be a reserve currency. This just requires economic stability in her state, as well as the absence of revolutions and other upheavals. But even if a currency is stable, involved in world trade and has a developed financial market, this does not mean that it has the status of a reserve unit. After all, money acquires this status only after leading banks in other countries begin to use it to preserve their own reserves. So it turns out that world reserve currencies are monetary units that perform the function of an investment asset. Currently, several currencies are considered reserve money. First of all, this is, of course, the American dollar (USD) and such as the common European currency euro (EUR), Japanese yen (JPY), British pound sterling (GBP), Swiss franc (CHF), as well as several others. It is these monetary units that are in the assets of most states.

Reserve currency dollar (USD)

The dollar appeared back in 1861. Then, at the request of Congress, about 57 million banknotes were printed. Although the official birthday of the dollar is still considered to be July 6, 1785. It was on this day that he was officially registered. It is believed that the dollar is the world's No. 1 reserve currency. Indeed, over the past decade, more than 50% of the total gold and foreign exchange reserves of all countries of the world were calculated in this particular monetary unit. Why is the dollar the world's settlement and reserve currency? In order to answer this question, it is necessary to plunge a little into history.

As the consequences of World War II became clearer, it became clear that drastic measures had to be taken. Thus, at the next congress, a single price for 1 troy ounce of oil was adopted in the amount of $35. And with this, the countries recognized the American dollar as a single settlement and reserve currency. As you know, during the war the American economy suffered the least, and the US gold reserves were huge. In addition, the United States had a powerful industry. This was due, first of all, to the fact that countries on the trade market often wanted to buy something in return. This allowed the United States not only to look like a leader in the world market, but also to strengthen the country’s economy as a whole. It is not surprising that during this period countries needed to engage more in exports, because such a strategy allowed them to accumulate gold and currency. So it turned out that the United States, exporting its own currency, received the status of the most stable country, and the dollar took a leading position and a high rank.

as the world's reserve currency

The history of this monetary unit dates back to 1995. It was this year in Madrid that the EU decided to “christen” the future common currency of eleven states - the “euro”. Although the development of the European monetary unit project began back in 1979. This idea was truly grandiose. After all, previously all attempts to create some kind of financial union ended in disastrous results. Just like the dollar, the euro has a lot of support from other countries, which gives it the opportunity to become the leading currency for the formation of exchange rates. But the fact that members of the Union of Europe support this banknote, has some Negative influence, associated with the irregular development of these states. Analysts believe that soon, due to the fact that the internationalization of the euro has given impetus to the formation of a bipolar global monetary and financial system, it and the dollar will have an impact on different zones and territories. The euro is likely to remain within Eastern and Central Europe, while the dollar will dominate within South and East Asia and Latin America. But today we can safely say that these are the two most powerful world reserve currencies.

Japanese yen (JPY) - an honorable third place

Previously considered one of the most powerful safe-haven currencies. But its popularity has definitely declined over the past few years. And today this monetary unit occupies only third place in the financial market. The yen was created in 1871, although other gold, silver and paper money existed in parallel with it. Well, the international title came to her on May 11, 1953, exactly when the International Monetary Fund legalized her relationship with gold weighing 2.5 milligrams.

Of course, its volume in the modern financial market is significantly inferior to the leading dollar and euro. But this does not at all prevent the Japanese yen from occupying an honorable third place among the world's reserve currencies. This monetary unit differs from its competitors in its fairly high round-the-clock liquidity throughout the world. And despite its position among the leaders, the yen is indispensable in international financial markets.

World currency pound sterling (GBP)

The pound sterling is a fairly traded currency in the world. That is why it ranks fourth in terms of trust among citizens of the entire Earth. The concept of “pound sterling” first appeared in 1694. And in the period from 1821 to 1914, it was this monetary unit that was considered the main reserve currency in the financial market. Unfortunately, after the Second World War, Great Britain was significantly weakened. This gave the US the opportunity to become a leader in some sense, and the dollar to replace the pound sterling.

The appearance of the euro on the financial market also had a significant impact on this currency. After all, before the EU decided to create a single European national currency, the pound sterling benefited from all sorts of rumors about the convergence of exchange rates. And if the results of the referendum in Great Britain had been positive, the pound would have joined the euro back in 2000. Almost 14% of the world market consists of pounds sterling. And this is a very good result.

Stable Swiss franc (CHF)

People first started talking about this currency back in 1850. In terms of its nominal value, this monetary unit was equal to the French franc. The main advantage of this currency is that it is practically the most stable in the world. Throughout history, the devaluation of the franc has been recorded only a few times. Thanks to this, it enjoys high trust among citizens around the world.

Traditionally referred to as the currency of low-tax zones with zero inflation. As a reserve currency, it has secured fourth place. And although it represents the only monetary unit that is not part of the EU and the G7 countries, and its share almost never rises above 0.3%, thanks to its “eternal” stability, it never loses its position in the world market . Although, with the introduction of the European single currency, the constancy and immutability of the Swiss franc exchange rate was somewhat diminished.

Ruble and yuan as reserve currencies

All world reserve currencies today have taken their rightful places. And if a few years ago, in 2007, the government Russian Federation declared that the ruble could safely be exported to the world, then after all the crises it had experienced, this became almost impossible. That is why most analysts concluded that the ruble will not be able to take its place among the safe-haven currencies in the near future.

The same, in principle, cannot be said about the World reserve currency, as is known, must have a “set of leadership qualities.” Today, China is doing everything to ensure that its national currency strengthens and grows. And, according to leading experts, he does it well. After all, according to data for 2014, this particular currency became one of the 10 actively traded ones, having outstripped 22 “opponents” over the past three years. Work on the offshore market is also in last years does not stand still, and at the end of March 2014, Germany agreed with China on cooperation in clearing, as well as on settlements in yuan. Besides stock exchanges Hong Kong and Shanghai opened a cross-trading mechanism, gold in China's reserves increased significantly, and 40 world banks made investments in the Chinese currency. All this leads to the fact that in just a few years the yuan will take pride of place as the number one reserve currency in the world.

Forecast for 2015

It is difficult to predict what the world monetary system will be like in the coming years. In connection with the current crisis caused by a sharp decline in the price of oil, it is quite difficult to assume what awaits the financial world. The ruble failed, but today Russia, together with China, is doing everything possible to minimize the influence of the American currency on the global financial market. And no matter how sad this may sound for the United States, the yuan is in any case guaranteed to have a future as a reserve currency. After all, not only experts speak about this, but also research data foreign exchange markets world over the past few years. China has long proven its worth as a major trading force and the strongest exporter with the second largest economy in the world. And many experts claim that in 10 years the yuan will achieve its goals. In addition, China is already taking confident steps towards this. And, as you know, world reserve currencies are the currencies of those countries that have gone through a difficult path!

Used to create a cash reserve in the central banks of other countries for the purpose of carrying out international payments.

Sometimes this term also refers to national credit money, the currency of the leading countries of the world, used for international payments.

The status of a reserve currency gives advantages to the issuing country: the ability to cover the balance of payments deficit with the national currency, to help strengthen the position of national exporters in competition in the world market. At the same time, the promotion of a country's currency to the role of reserve imposes certain responsibilities on its economy: it is necessary to maintain the relative stability of this currency, and not resort to devaluation, currency and trade restrictions. The reserve currency status obliges the issuing country to take measures to eliminate the balance of payments deficit and subordinate domestic economic policy the task of achieving external equilibrium.

Initially, the British pound sterling played the role of reserve currency, playing a dominant role in international payments. Along with the pound sterling, the US dollar gradually began to be used as an international payment and reserve currency, which soon took a dominant position.

By decisions of the Bretton Woods conference (USA, 1944), a gold exchange standard was introduced, based on gold and two currencies - the US dollar and the British pound sterling. According to the new rules, the dollar became the only currency pegged directly to gold. The US Treasury agreed to exchange dollars for gold to foreign government agencies and central banks at a rate of $35 per troy ounce. In fact, gold has turned from the main to a reserve currency.

In 1976, as a result of the agreements of the Jamaican Currency Conference (Kingston, Jamaica), the Jamaican currency system was officially legalized, which provided for free fluctuation of exchange rates. The German mark, Japanese yen, and Swiss franc began to be used as reserve currencies.

By the beginning of the 21st century, the US dollar had become the world's main reserve currency. It occupies, according to various estimates, a share of 50 to 61 percent in the international reserves of central banks.

The euro is the second most used reserve currency. After the introduction of the euro in 1999, the currency partially inherited its share of settlements and reserves from the German mark, French franc and other European currencies that were used for settlements and savings. Since then, the euro's share has steadily increased as central banks seek to diversify their reserves.

The pound sterling was the main reserve currency in most countries of the world in the 18th and 19th centuries. The difficult economic situation in Great Britain after the Second World War and the increasing dominance of the United States in the world economy led to the loss of the pound sterling's status as the most significant currency.

The Japanese yen has been viewed as the third most important reserve currency for several decades, but the currency's use has declined recently.

The Swiss franc is used as a reserve currency due to its stability, although the share of total foreign exchange reserves in Swiss francs is generally below 0.3%.

In recent years, a number of countries have expressed interest in promoting their currencies for use as world reserve currencies.

The possibility of giving the ruble the status of a world reserve currency was first discussed at the highest level by Russian President Vladimir Putin, who spoke in June 2007 at the St. Petersburg International Economic Forum. In mid-February 2008, Dmitry Medvedev, then still holding the post of First Deputy Prime Minister, said the same thing at the Krasnoyarsk Economic Forum.

Although China has not made official statements about giving the yuan the functions of a reserve currency, however, thanks to the growing role of this country in international trade, the role of its currency in the world is actively growing. China already uses the yuan in payments with neighboring countries, including Russia and South Korea.

The Gulf Cooperation Council, in turn, plans to introduce a regional currency, the Gulf Dinar, in 2010, which will be used as a reserve currency.

In addition, Russia, as part of the initiatives for the London G20 summit, proposed to instruct the IMF to study the possibility of creating a supranational reserve currency, as well as to mandatory diversify the currency structure of reserves and operations of national banks and international financial organizations.

The material was prepared based on information from RIA Novosti and open sources